An analysis of the correlation between profitability and liquidity of beverage companies in Chinese market

Abstract

The relationship between profitability and liquidity is still controversial since many researchers obtain different conclusions from their studies. Besides, the Chinese market is getting more and more attention and profitability and liquidity are crucial for Chinese companies to keep operation management. Consequently, this thesis analyses the relationship between liquidity, company size, corporation growth and profitability of beverage companies in Chinese market between 2015 and 2017. Desk research can be used to getting the financial data published by the companies; the relationship was studied with the help of ratio analysis, horizontal analysis, description analysis, Pearson correlation coefficient and also a regression analysis. Surprisingly it was observed weak or insignificant positive correlation between liquidity, company size, corporation growth and profitability on the short run, contradicting the main literature. The conclusions are limited to the periods examined and the sample companies.

Key words: Profitability, liquidity, Chinese beverage companies, Working capital, Current Ratio, Company Size and Corporation Growth

DOI: 10.7176/RJFA/11-12-17

Publication date:June 30th 2020